Ismael Hossein-zadeh has an essay this week about how Marxism is better than Keynesianism at explaining the current terrible economic picture, and has better prescriptions for fixing it as well. To me the article is a great example of both the strengths and (greater) weaknesses of Marxist critique.

Drought

Marxist critique is strongest in describing the nature of capitalism and the environment it seeks to create. Capitalism seems to gravitate toward a permanent “reserve army of labor” – lots of out of work people who would love to have a job. Having a pool of idle but willing unemployed puts pressure on those who do have jobs. It puts downward pressure on wages, discourages organizing, and gives maximum leverage to the employer.

So far, so good. That dynamic should be front and center in any discussion on how to improve things. Asserting the right of collective bargaining and finding ways to support it is crucial. Getting all those people on the sidelines back into the game is vital. The article also has some interesting material on how the globalization of capital and labor are challenges that Keynes did not seem to anticipate, and that his theory does not adequately address.

Hossein-zadeh’s critique starts to go astray with what he calls structural or systemic causes of unemployment, with Keynesianism producing a perpetual cat-and-mouse game. Stimulus spending gets an economy out of an economic downturn. When the economy is humming again the stimulus is pared back, which leaves the field open for capitalist exploitation, which then brings about an economic downturn. Repeat forever. In this telling Keynesianism is the cause of downturns, because that cycle could be done away with forever by not ending the stimulus. That seems at best uncharitable, since Keynesianism doesn’t claim to abolish the business cycle. It merely describes the tools to use during down times.

But Hossein-zadeh really goes far afield when he conflates Keynesians’ prescriptions with their expectations:

The Keynesian view that the government can fine-tune the economy through fiscal and monetary policies to maintain continuous growth is based on the idea that capitalism can be controlled or manipulated by the state and managed by professional economists from government departments in the interest of all. The effectiveness of the Keynesian model is, therefore, based largely on a hope, or illusion; since in reality the power relation between the state and the market/capitalism is usually the other way around. Contrary to the Keynesian perception, economic policy making is more than simply an administrative or technical matter of choice; more importantly, it is a deeply socio-political matter that is organically intertwined with the class nature of the state and the policy making apparatus.

It’s fair to describe the Keynesian approach as administrative or technical – magneto trouble and all that – but I haven’t gotten the impression that Keynesians, Paul Krugman foremost among them, are under any illusion that policymakers are compelled to embrace Keynesianism. There certainly seems to be a great deal of frustration about the nature of the public debate. The austerity narrative continues to be ascendant in spite of the overwhelming evidence of the harm it has caused. Keynesian policy, particularly the 2009 stimulus package, has been vindicated (and Krugman wrote at the time that it was actually not large enough) – yet it still seems to be regarded as disreputable in the capitol.

So of course Keynesians are frustrated, but not because they thought Washington was required to implement Keynesian policies and had not. They are frustrated because they see the current problem as a technocratic one with a known solution – but austerity budgeting continues to rule the day, even in the face of overwhelming evidence that it has failed. The carburetor is broken; fix it. Krugman sees a moral or ethical dimension as well: the refusal to fix it has inflicted a great deal of unnecessary misery. But Keynesianism ultimately just says, if this is your problem, here’s the solution.

Keynesianism is also clear about the role government plays in the economy: Let the private sector be the economic engine of first resort and government the last. If businesses are creating lots of jobs at good wages, money is circulating through the economy, and everything is going swimmingly, then leave it at that. If the private sector is stagnating or shrinking though, then the public sector needs to step in and provide the spending and job creation that the private sector isn’t. Once that changes – once businesses start hiring and spending again – government backs off and lets them do their thing. Policymakers can choose not to do that, and the expected result will be to make the problem worse. No illusions required. (Krugman does get irritated when leaders plead ignorance or act like no one knows what the answer is, though.)

Marxist critiques like Hossein-zadeh’s, on the other hand, lead with a lot of “workers of the world, unite” rhetoric, but leave what comes after the revolution offstage. Maybe it’s because that role – a centrally planned economy – doesn’t have a very good track record, and would be a tough sell for an American audience. Maybe it’s because it is much more entertaining to issue calls to arms than to figure out how to make a just, equitable and vibrant economy in a nation with hundreds of millions of citizens. Whatever the reason, though, it leaves a glaring and obvious hole in the center of the argument. And if you can’t bring yourself to name the thing you want, you can’t expect to reach anyone not already in the fold.

There’s a similar hole in the description of how the change will come about. Hossein-zadeh says Keynesianism’s fatal flaw is its expectation that politicians sympathetic to big money will enact policies antagonistic to it. (Again, I don’t think that’s true – Keynesiansm just describes how to address the issue. Whether leaders actually take that approach is another matter.) Hossein-zadeh envisions a bottom-up approach, with change being generated by “overwhelming political pressure from workers and other grassroots.” But he never describes how to build that pressure, and that makes his position look as fanciful as the one he criticizes. He writes: “the Marxian view that meaningful, lasting economic safety-net programs can be carried out only through overwhelming pressure from the masses – and only on a coordinated global scale – provides a more logical and promising solution.” OK, great. How?

Building a political movement in response to a gradually developing disaster is unbelievably difficult. It’s far more likely to spontaneously occur in response to a spectacular event. The activism in Ferguson since the killing of Mike Brown is a good recent example. (And incidentally, if one wants to build a grassroots social justice movement, identifying and supporting the issues people are currently speaking out on might be a good starting point – even if the issue isn’t the one you’re focused on.) A hurricane and a drought are both extreme ecological events, but one happens suddenly and visibly while the other is gradual and harder to spot. Which of those is more likely to inspire a strong response?

Marxist critique depends on workers rising up en masse, but never seems to describe how that happens. It leaves the hardest task to the imagination. And since spontaneous large scale organizing doesn’t just naturally happen on its own, the likely situation is for people in bad situations to stay in them. (Which can easily lead to a theoretical love of the common man souring into contempt for the actual sheeple who participate in their own oppression.) Hossein-zadeh is presumably aware of this, since he links to a piece by Alan Nasser noting that “US workers tend to quiescence.” Isn’t that a rather big hurdle? How does he propose to overcome it? Instead of utopian calls for wide scale mobilization, presumably led by those doing the calling, why not show solidarity with those already doing so on a smaller scale?

Why not go to those in Ferguson, or those fighting water shutoffs in Detroit, and say “what do you need us to do?” Marxist prescriptions like Hossein-zadeh’s never seem to want to get into the details, or to recognize the activism already dotting the landscape. It always seems to boil down to, everyone throw in with us. And that might be the biggest illusion of all.

15 Responses to Hurricanes, droughts and the basic weakness of Marxist critique

Economics is a pseudo-science. Economist are propagators of particular ideologies not scientist.

If one had to choose only between a Marxist and Keynesianist, I would the choose the Marxist, for at the very least a Marxist believes in the potential for human beings in building a better world.

“Keynesianism’s fatal flaw is its expectation that politicians sympathetic to big money will enact policies antagonistic to it. (Again, I don’t think that’s true – Keynesiansm just describes how to address the issue. Whether leaders actually take that approach is another matter.)” Maybe you should have told JMK.

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” -John Maynard Keynes

“The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion.”-John Maynard Keynes

For a Marxist, since it does not exist in the Western World, it is rather easy to predict all manner of improvement over what exists. It is similar for Keynes except we know it works – witness the depression and this last recession. That it has not solved our problems is an issue of political will – something that would exist under any economic system.

But the fact is unemployment and poverty can be cured. And within our current system, no revolution needed. We can give a job to every person who wants one. The government can be the employer of last resort, what some call a job guarantee. But then we first have to deal with congress and the nut jobs hanging out there. And maybe resurrect FDR. And that is a problem I would think./s

“The government can be is the employer of last resort, what some call a job guarantee.” and some call it the military. No, revolution is necessary, not only in how we(humans) organize and govern our selves, but most importantly, a revolution of the human mind, where understanding that more can be accomplished through cooperation instead of competition.

My takeaway from Ismael’s article was a bit different than yours, Danps.
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My take is that any economic policy whose execution depends on wise and benevolent politicians is unlikely to work, at least not for long, because most of the time our politicians are neither wise nor benevolent. That rule of thumb applies to Marxism as well as Keynesianism (or Functional Finance, or MMT).
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As for what to do about it, that’s another story, but I suggest we aim for an economic system with more automatic stablilizers and a more robust safety net. That way, even when the politicians screw the economy up, we’ll have a safety net to fall back on, and the automatic stabilizers will kick in to fix things.
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Examples of automatic stabilizers, in addition to the existing ones:
– index the SS retirement age to the unemployment rate. As unemployment goes up, let people retire earlier
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– a means-tested basic income guarantee. Note that a means-tested BIG is an automatic stabilizer, while a universal BIG is not.
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– index the FICA tax to the unemployment rate. When unemployment is high, FICA is zero. When unemployment approaches zero, FICA ramps back up.
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– bring back the 1945 Full Employment Act (as distinct from the MMT JG) that recognized the legal right to a job and mandated a full employment budget based on the principles of functional finance.
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While I think there is merit to government job programs, that’s another one of those things that requires wise and benevolent politicians to manage. However, if we passed the 1945 Full Employment Act, government job programs could, at the discretion of the politicians, play a role in meeting the full employment mandate of that law.
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It would still be necessary to have wise and benevolent politicians to pass my proposals in the first place, so you’d have to wait for that once in a hundred years wise and benevolent government to come along to get the laws passed. But once the programs are in place and gain popular acceptance, then we can expect government inertia and popular support to keep them going.

Marxist critiques like Hossein-zadeh’s, on the other hand, lead with a lot of “workers of the world, unite” rhetoric, but leave what comes after the revolution offstage. Maybe it’s because that role – a centrally planned economy – doesn’t have a very good track record, and would be a tough sell for an American audience.

Actually, centrally planned economies have excellent track records. Industrializing Russia and China were not small feats. The problem is one of what centrally planned economies were designed to do, and of whether the function of a centrally planned economy is appropriate to a 21st century capitalist world-system.

Centrally planned economies were part of what Immanuel Wallerstein called a “mercantilistic semi-withdrawal from the capitalist world system,” within the political context of robust early and mid-20th century capitalism. Such withdrawals were appropriate to what Kees van der Pijl called “contender states,” national entities trying to “catch up” in “development” with the core nations.

What we need today is a decentralized, non-capitalist economy, neither Keynesian nor Stalinist. Was that so hard?

P.S. The MMT job guarantee was designed to be an automatic stabilizer. As unemployment goes up the government funds more jobs and as the economy improves, the private sector must pay more and hire the workers away from the government. Plus a bonus,
we don’t need military Keynesianism. Sort of like the WPA which worked. But again, how to get there from here.

Counterpunch’s irritating “anti-Keynesianism,” which is not even anti-Keynesianism but anti-the-fact-that-governments-resist-Keynesianism, which somehow Counterpunch adds up to “anti-Keynesian.” As you note, Hossein-zadeh proposes “overwhelming political pressure from workers and other grassroots” as the path to power, as if this contrasts with whatever he thinks Keynesians recommend to get over the hurdle that the capitalists control the political system because they control nearly all of the money and media. But of course some Keynesians agree with Hossein-zadeh’s suggested path, and some do not, because Keynesians don’t have a standard position on that key political question — how to gain power starting from our current political-resource-poor situation — because it has nothing to do with Keynesian economics. Or with Marxist economics for that matter. It may have to do with Marxist political understandings, which Keynesian economics doesn’t have a position on.

Both Keynesian and Marxist economics are about what you would do if you had control over the government and could implement the economic policies you wanted to. And that’s where debate between the two approaches should be focused.

But I never see that sort of analysis or critique in Counterpunch’s anti-Keynesian stuff. Instead it’s always “You Keynesians don’t understand how impossible it is to get your policies enacted, so why do you even recommend them?” But Keynesians of course do know how hard things are. They also realize Marxists are in the same boat but don’t criticize them for still making policy recommendations. What would be the point of that?

How can Keynensian policy be both defeated by austerity and vindicated? Why, because the technocrats don’t do the right thing!

Hossein-zadeh explains the failure of Keynesianism in that “public policies are more than simply administrative or technical matters of choice—more importantly, they are class policies.” The author’s exculpatory plea is that policy makers are not compelled to follow Keynesian dictat. Is that not ludicrously evasive?

cassiodorous notes the effective centrally planned economies are unsuitable today, as would be the mythical Keynesian ones (which fill a hole in capitalist ideology). Where is the enlightened technocratic analysis of present political economy instead of this fraudulent morality play? It should be absolutely clear by now that the “ethical failure” of technocrats to address the multiple crises of capitalism is a cynical, “realist”, sacrificial policy. It should have been exposed long ago. Here we get pleas for mercy or integrity which are instead, excuses.

Hossein-zadeh’s recommendation of mass pressure is an afterthought whereas this advocacy of politique du pire is an abomination. Not so long ago we were told that class politics were unnecessary. Now it appears that was only a ruse to inflict a crisis for the purpose of mobilization.

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